BP to start production of heavy Alaska oil

ANCHORAGE, Alaska, March 15 (Reuters) - Oil giant BP Plc BP.L is putting the finishing touches on a $100 million facility that this spring will process the company's first commercially-produced heavy oil from Alaska's North Slope, a spokesman said on Monday.

The facility, at BP’s Milne Point field, will process oil produced from four wells that will tap the vast but elusive layer of heavy oil above some of the North Slope’s conventional oil reserves, said Steve Rinehart, spokesman for BP’s exploration unit in the state.

Production from the four wells is scheduled to start in May, Rinehart said.

Oil production rates from the four wells are as yet unknown, but BP believes starting up this spring is the right time, Rinehart said. “It’s important, we believe, to start this production soon, while there is still light-oil production sufficient to mix with the heavy oil so that it will flow easily through pipelines,” he said.

The North Slope holds about 20 billion barrels of heavy oil, a resource not counted in any companies’ reserves because it is not yet considered technically recoverable with methods used in the region. The heavy oil, commonly described as having the thickness of cold honey, lies at shallow depths above major reservoirs like Kuparuk that have long fed North Slope production.

Although heavy oil is currently being produced in significant amounts in regions such as Alberta and Venezuela, it has long been considered technically off-limits in Alaska because it cannot be recovered through methods currently used on the North Slope. BP hopes that recovery methods elsewhere in the world will prove effective at heavy-oil production in Alaska, Rinehart said.

Because the North Slope heavy oil is so thick and riddled with other challenges, it is likely that only a relatively small percentage of the total reserves will ever be produced, company officials have said.

According to BP experts, “Recovery might be 10 percent,” Rinehart said. “The other side of it is 10 percent of a 20 billion-barrel deposit is significant.” (Editing by Bill Rigby and Carol Bishopric)